The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
The accompanying notes are an integral part of
these financial statements.
NOTES TO FINANCIAL STATEMENTS
Note
1 — Description of Organization and Business Operations
Delwinds Insurance Acquisition
Corporation (the “Company”) was incorporated in Delaware on April 27, 2020. The Company was formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(the “Business Combination”).
Although the Company is not
limited to a particular industry or sector for purposes of consummating a Business Combination, the Company has focused its search on
companies in the insurance industry. The Company is a blank check and emerging growth company and, as such, the Company is subject to
all of the risks associated with blank check and emerging growth companies.
All activity through December 15, 2020 relates to the Company’s
formation and the initial public offering (“Initial Public Offering”), which is described below. Since the Initial Public
Offering, the Company’s activities have been limited to the evaluation of Business Combination candidates, including FOXO, and the
execution of the FOXO Transaction Agreement, and the Company will not generate any operating revenues until after the completion of its
initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on marketable
securities held in the Trust Account. The Company is incurring expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence and transaction expenses. The Company recognizes changes in the fair
value of warrant liability as other income (expense). The Company has selected December 31 as its fiscal year end.
The registration statement
of the Company’s Initial Public Offering was declared effective on December 10, 2020. On December 15, 2020, the Company consummated
the Initial Public Offering of 20,125,000 units (“Units”) each consisting of one share of Class A common stock (“Public
Shares”) and one-half of one redeemable warrant, generating gross proceeds of $201,250,000, which is described in Note 3.
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the sale of 632,500 units (the “Placement Units”) at a price of $10.00
per Placement Unit in a private placement to DIAC Sponsor, LLC (the “Sponsor”) generating gross proceeds of $6,325,000, which
is described in Note 4.
Following the closing of the Initial
Public Offering on December 15, 2020, an amount of $201,250,000 ($10.00 per Unit) from the net proceeds of the Initial Public Offering
and Placement Units was placed in a trust account (“Trust Account”) which may be invested in U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”),
with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the
Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the
consummation of the initial Business Combination or (ii) the distribution of the Trust Account, as described below, except that interest
earned on the Trust Account can be released to the Company to pay its tax obligations.
Transaction costs amounted
to $11,494,785, consisting of $4,025,000 of underwriting fees, $7,043,750 of deferred underwriting fees and $426,035 of Initial Public
Offering costs. In addition, $2,054,942 of cash was held outside of the Trust Account was available for working capital purposes immediately
following the Initial Public Offering.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Placement
Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or
more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding
the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the agreement to enter
into the initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires
50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment Company Act.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 — Description of Organization
and Business Operations (cont.)
The Company will provide its
holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the
Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business
Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled
to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public
Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its
tax obligations). The per-share amount to be distributed to public stockholders who redeem their Public Shares will not be reduced by
the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights
upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption are
recorded at a redemption value and classified as temporary equity in accordance with the Accounting Standards Codification (“ASC”)
Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination if the Company has
net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination and, if the
Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote
is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will,
pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file
tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is
required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company
seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor has agreed to vote its Founder Shares
(as defined in Note 5), Placement Shares (as defined in Note 4) and any Public Shares purchased during or after the Initial Public Offering
in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective
of whether they vote for or against the proposed transaction.
If the Company seeks stockholder
approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate
of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such
stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more
of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect
to its Founder Shares, Placement Shares and Public Shares held by it in connection with the completion of a Business Combination and (b)
not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) that would affect the substance or timing of
the Company’s obligation to allow redemption in connection with a Business Combination or to redeem 100% of its Public Shares if
the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholder’s rights
or pre-Business Combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public
Shares in conjunction with any such amendment.
If the Company is unable to
complete a Business Combination within 18 months from the closing of the Initial Public Offering (the “Combination Period”),
the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit
in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay
its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares,
which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further
liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate,
subject in the case of clauses (ii) and (iii) above to the Company’s obligations under Delaware law to provide for claims of creditors
and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s
warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to
waive its liquidation rights with respect to the Founder Shares and Placement Shares if the Company fails to complete a Business Combination
within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares
will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the
Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in
the Trust Account in the event the Company does not complete a Business Combination within in the Combination Period and, in such event,
such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public
Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution
will be less than the Initial Public Offering price per Unit ($10.00).
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 — Description of Organization
and Business Operations (cont.)
In order to protect the amounts
held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount
per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to
reductions in the value of the trust assets. This liability will not apply with respect to any claims by a third party who executed a
waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Company’s
indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act
of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against
a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to
reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers (except the Company’s independent registered accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any
kind in or to monies held in the Trust Account.
Note 2 — Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying financial
statements are presented in in conformity with accounting principles generally accepted in the United States of America (“GAAP”)
and pursuant to the rules and regulations of the SEC.
Emerging Growth Company
The Company is an “emerging
growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure
obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 2 — Summary of Significant Accounting
Policies (cont.)
Use of Estimates
The preparation of financial
statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation
or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly
from those estimates.
Risks and Uncertainties
Management is currently evaluating
the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a
negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific
impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Offering Costs
Offering costs consist of
legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the Initial
Public Offering. Offering costs amounting to $11,494,785 were charged to stockholders’ equity upon the completion of the Initial
Public Offering.
Income Taxes
The Company follows the asset
and liability method of accounting for income taxes under ASC Topic 740, “Income Taxes” (“ASC 740”). Deferred
tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized.
ASC 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2022 and 2021. The Company is
currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is subject to income tax examinations by major taxing authorities since inception.
The provision for income taxes
was deemed to be deminimus for the three months ended March 31, 2022 and 2021. As of March 31, 2022, the Company had $770,000 in net operating
carryforwards available to offset future taxable income.
Net Income (Loss) Per Common Share
Basic income (loss) per common
share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding
during the period. Consistent with ASC 480, common stock subject to possible redemption, as well as their pro rata share of undistributed
trust earnings consistent with the two-class method, have been excluded from the calculation of income (loss) per common share for the
three months ended March 31, 2022 and 2021. Such shares, if redeemed, only participate in their pro rata share of trust earnings. Diluted
income (loss) per share includes the incremental number of shares of common stock to be issued to settle warrants and convertible debt,
as calculated using the treasury method. For the three months ended March 31, 2022 and 2021, the Company did not have any dilutive warrants,
securities or other contracts that could potentially, be exercised or converted into common stock, since the exercise of the warrants
and conversion of debt is contingent on the occurrence of future events. As a result, diluted income (loss) per common share is the same
as basic income (loss) per common share for the periods presented.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 2 — Summary of Significant Accounting
Policies (cont.)
A reconciliation of net income
(loss) per common share as adjusted for the portion of income that is attributable to common stock subject to redemption is as follows:
| |
Three
Months
ended | | |
Three
Months
ended | |
| |
March 31, 2022 | | |
March 31,
2021 | |
Net income (loss) | |
$ | (376,972 | ) | |
$ | 4,997,348 | |
Less: Income (loss) attributable to common stock subject to possible redemption | |
| - | | |
| - | |
Net income (loss) available to common shares | |
$ | (376,972 | ) | |
$ | 4,997,348 | |
| |
| | | |
| | |
Basic and diluted weighted average number of Class A common shares | |
| 25,757,500 | | |
| 25,757,500 | |
| |
| | | |
| | |
Basic and diluted income (loss) available to Class A common shares | |
$ | (0.07 | ) | |
$ | 0.88 | |
| |
| | | |
| | |
Basic and diluted weighted average number of Class B common shares | |
| 5,031,250 | | |
| 5,031,250 | |
| |
| | | |
| | |
Basic and diluted income (loss) available to Class B common shares | |
$ | (0.07 | ) | |
$ | 0.88 | |
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $250,000. At March 31, 2022 and December 31, 2021, the Company has not experienced
losses on this account and management believes the Company is not exposed to significant risks on such account.
Financial Instruments
The fair value of the Company’s
assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures”
(“ASC 820”), approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Recent Accounting Pronouncements
Management does not believe
that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the
Company’s financial statements.
Note 3 — Public Offering
Pursuant to the Initial Public
Offering, the Company sold 20,125,000 Units at a price of $10.00 per Unit, including the underwriter over-allotment of 2,625,000. Each
Unit consists of one-half of one Public Warrant. Each whole Public Warrant will entitle the holder to purchase one share of Class A common
stock at a price of $11.50 per share, subject to adjustment (see Note 7).
Note 4 — Private Placement
The Sponsor purchased an aggregate
of 632,500 Placement Units at a price of $10.00 per Placement Unit, for an aggregate purchase price of $6,325,000, in a private placement
that occurred simultaneously with the closing of the Initial Public Offering, inclusive of 52,500 Placement Units purchased as a result
of the exercise of the underwriters’ over-allotment option. Each Placement Unit consists of one Placement Share and one-half of
one Placement Warrant. Each whole Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50
per share. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Placement
Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Placement Units
and all underlying securities will expire worthless.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 5 — Related Party Transactions
Founder Shares
On May 28, 2020, the Sponsor
purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000.
On November 30, 2020, the Sponsor returned to the Company, at no cost, an aggregate of 718,750 Founder Shares, which the Company cancelled,
resulting in an aggregate of 5,031,250 Founder Shares outstanding and held by the Sponsor. The Founder Shares will automatically convert
into Class A common stock upon consummation of a Business Combination on a one-for-one basis, subject to certain adjustments, as described
in Note 8. The Sponsor agreed to forfeit up to 562,500 Founder Shares to the extent that the over-allotment option was not exercised in
full by the underwriters. As a result of the underwriters’ over-allotment exercise in full, no shares are currently subject to forfeiture.
The Sponsor has agreed, subject
to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the
completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the Class A common stock
equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for
any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which
the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s
stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Related Party Loans
On May 29, 2020, the Sponsor
agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Proposed Public Offering pursuant to a promissory
note (the “Promissory Note”). The Promissory Note is non-interest bearing and payable on the earlier of December 31, 2020
or the completion of the Public Offering. On December 29, 2020, the Company repaid $141,134 of borrowings outstanding under the Promissory
Note.
In addition, in order to finance
transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing,
the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $2,000,000 of such Working Capital Loans may be convertible into units upon consummation of the Business Combination
at a price of $10.00 per unit. The units would be identical to the Placement Units. On February 23, 2022, we issued a promissory note
(the “Note”) in the principal amount of up to $2,000,000 to the Sponsor. The Note was issued in connection with advances the
Sponsor has made, and may make in the future, to the Company for working capital expenses. As of March 31, 2022, we have drawn down $200,000
under the Note.
Administrative Support Agreement
The Company has agreed, commencing
on the effective date of the Initial Public Offering through the earlier of the Company’s consummation of a Business Combination
and its liquidation, to pay an affiliate of the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative
support. At March 31, 2022 and December 31, 2021, a total of $5,000 was recorded as Due to Sponsor on the balance sheet related to this
agreement. For the periods ending March 31, 2022 and December 31, 2021, under this agreement we paid a total of $30,000 and $120,000,
respectively.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 6 — Commitments
Registration Rights
Pursuant to a registration
rights agreement entered into on December 10,2020, holders of the Founder Shares, Placement Units (including securities contained therein)
and units (including securities contained therein) that may be issued upon conversion of Working Capital Loans, and any shares of Class
A common stock issuable upon the exercise of the Placement Warrants and any shares of Class A common stock and warrants (and underlying
Class A common stock) that may be issued upon conversion of units issued as part of the Working Capital Loans and Class A common stock
issuable upon conversion of the Founder Shares, are entitled to registration rights, requiring the Company to register such securities
for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the majority of these securities
are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of
a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities
Act. The Company will bear the expenses incurred in connection with the filing of any such registration statements. The registration rights
agreement does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the Company’s
securities.
Underwriting Agreement
The Company paid an underwriting
discount of $0.20 per Unit, or $4,025,000 in the aggregate, simultaneously with the closing of the Initial Public Offering. In addition,
the underwriters are entitled to a deferred fee of (i) $0.35 per Unit of the gross proceeds of the initial 20,125,000 Units sold in the
Initial Public Offering, or $7,043,750. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account
solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
FOXO Transaction Agreement
On February 24, 2022, we entered
into a definitive Agreement and Plan of Merger, dated as of February 24, 2022, as amended on April 26, 2022 (the “FOXO Transaction
Agreement”), with FOXO Technologies Inc., a Delaware corporation (“FOXO”), DWIN Merger Sub Inc., a Delaware corporation
and wholly owned subsidiary of the Company (“Merger Sub”), and the Sponsor, in its capacity as the representative of the stockholders
of the Company (other than FOXO’s security holders) (the “Purchaser Representative”) from and after the closing (the
“Closing”) of the transactions contemplated by the FOXO Transaction Agreement (collectively, the “Transaction”
or the “FOXO Business Combination”). Pursuant to the FOXO Transaction Agreement, subject to the terms and conditions set forth
therein, Merger Sub will merge with and into FOXO, with FOXO surviving the merger as a wholly-owned subsidiary of our Company (the “Combined
Company”), and with FOXO security holders becoming security holders of the Combined Company.
Voting and Support Agreements
Simultaneously with the execution
and delivery of FOXO Transaction Agreement, the Company and FOXO have entered into Voting and Support Agreements (collectively, the “Voting
Agreements”) with certain stockholders of FOXO required to approve the Transaction and other FOXO securityholders. Under the Voting
Agreements, each FOXO securityholder party thereto agreed to vote all of such stockholder’s shares of FOXO in favor of the FOXO
Transaction Agreement and the Transaction and the other matters to be submitted to the FOXO securityholder for approval in connection
with the Transaction and each FOXO securityholder party thereto has agreed to take (or not take, as applicable) certain other actions
in support of the FOXO Transaction Agreement and the Transaction, in each case in the manner and subject to the conditions set forth in
the Voting Agreements, and, in the case of the FOXO securityholder, to provide a proxy to the Company to vote such FOXO shares accordingly
(subject to the condition that the Registration Statement has been declared effective by the SEC, provided that the covenants not to take
certain actions to delay, impair or impede the Transaction as set forth in the Voting Agreements shall take effect from the date such
agreements are executed). The Voting Agreements prevent transfers of the FOXO shares held by the FOXO securityholder party thereto between
the date of the Voting Agreement and the date of Closing, except for certain permitted transfers where the recipient also agrees to comply
with the Voting Agreement.
Lock-Up Agreements
Simultaneously with the execution
and delivery of the FOXO Transaction Agreement, certain stockholders of FOX entered into Lock-Up Agreements with the Company (“Lock-Up
Agreements”). Pursuant to the Lock-Up Agreements, each Foxo securityholder party thereto agreed not to, during the period commencing
from the Closing and ending upon the earlier to occur of the one (1) year anniversary of the Closing or, if the lock-up period applicable
to the Company’s Founder Shares is amended in accordance with the Insider Letter Amendment Proposal, upon approval thereof by the
Company’s stockholders, 180 days after the Closing (subject to early release if the Company consummates a liquidation, merger, share
exchange or other similar transaction with an unaffiliated third party): (i) lend, offer, pledge, hypothecate, encumber, donate, assign,
sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant
to purchase, or otherwise transfer or dispose of, directly or indirectly, any Company restricted securities, (ii) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such Company restricted
securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i)
or (ii) above is to be settled by delivery of the Company’s restricted securities or other securities, in cash or otherwise (in
each case, subject to certain limited permitted transfers where the recipient takes the shares subject to the restrictions in the Lock-Up
Agreement). Additionally, prior to the Closing, the existing lock-up agreements between FOXO and holders of FOXO’s 2021 Bridge Debentures
(which, at the Closing, shall automatically convert into shares of FOXO Class A common stock exchangeable for the Company’s shares
in connection with the FOXO Business Combination), which lock-up agreements restrict transfers within a six month period after the Closing,
shall be amended to join the Purchaser and Purchaser Representative as parties thereto.
Non-Competition Agreements
Simultaneously with the execution
and delivery of the FOXO Transaction Agreement, certain FOXO executive officers entered into Non-Competition Agreements (“Non-Competition
Agreements”) in favor of FOXO and the Company and their respective present and future successors and direct and indirect subsidiaries.
Under the Non-Competition Agreements, the FOXO executive officers signatory thereto agree not to compete with FOXO, the Company and their
respective affiliates during the two-year period following the Closing and, during such two-year restricted period and not to solicit
employees or customers of such entities. The Non-Competition Agreements also contain customary confidentiality and non-disparagement provisions.
Financing Agreements
Common Stock Purchase Agreement
In connection with the FOXO
Transaction Agreement, we also entered into a Common Stock Purchase Agreement (“Common Stock Purchase Agreement”) with CF
Principal Investments LLC (“Cantor”), pursuant to which, the Combined Company after the closing of the FOXO Transaction Agreement
has the right from time to time to sell to Cantor up to $40 million in shares of its Class A common stock, subject to certain limitations
and conditions set forth therein.
Backstop Subscription Agreements
In connection with the FOXO
Transaction Agreement, we also entered into certain subscription agreements with Andrew J. Poole, our Chairman and Chief Executive Officer,
and The Gray Insurance Company, which is an affiliate of certain of our officers and directors (the “Backstop Investors”),
pursuant to which, in the event that, at the Closing, we have cash or cash equivalents of less than $10,000,000, the Backstop Investors
will subscribe for up to 1,000,000 shares of our Class A common stock, subject to certain limitations and conditions set forth therein.
Note 7 — Fair Value Measurements
The following table presents
information about the Company’s assets and liabilities that are measured on a recurring basis as of March 31, 2022 and December
31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value. In
general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.
Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves.
Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there
is little, if any, market activity for the asset or liability.
| |
March 31,
2022 | | |
Quoted
Prices in
Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Investments in United States treasury obligations held in Trust Account | |
$ | 200,046,995 | | |
$ | 200,046,995 | | |
$ | | | |
$ | | |
Investment in United States Treasury money market mutual funds and cash | |
| 1,280,600 | | |
| 1,280,600 | | |
| - | | |
| - | |
Total | |
$ | 201,327,595 | | |
$ | 201,327,595 | | |
$ | | | |
$ | | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liability | |
$ | 3,114,963 | | |
$ | 3,018,750 | | |
$ | 96,213 | | |
$ | - | |
| |
December 31,
2021 | | |
Quoted
Prices
in Active
Markets
(Level 1) | | |
Significant
Other
Observable
Inputs
(Level 2) | | |
Significant
Other
Unobservable
Inputs
(Level 3) | |
Assets: | |
| | |
| | |
| | |
| |
Investment in United States Treasury money market mutual funds | |
$ | 201,278,924 | | |
$ | 201,278,924 | | |
| | | |
| | |
Total | |
$ | 201,278,924 | | |
$ | 201,278,924 | | |
$ | - | | |
$ | - | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant Liability | |
$ | 5,088,750 | | |
$ | 4,930,625 | | |
$ | 158,125 | | |
$ | - | |
Warrant Liability
The Warrants are accounted
for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the Company’s balance sheet. The
warrant liability is measured at fair value at inception and on a recurring basis, with any subsequent changes in fair value presented
within change in fair value of warrant liability in the Company’s statement of operations.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 7 — Fair Value Measurements
(cont.)
Initial Measurement and Subsequent Measurement
The Company established the initial fair value for the Warrants on
December 15, 2020, the date of the closing of the Initial Public Offering, and subsequent fair value as of March 31, 2022 and December
31, 2021. The Public Warrants and Private Placement Warrants are measured at fair value on a recurring basis, using an Options Pricing
Model (the “OPM”). The Company allocated the proceeds received from (i) the sale of Units in the Initial Public Offering (which
is inclusive of one share of Class A common stock and one-third of one Public Warrant), (ii) the sale of the Placement Units (which is
inclusive of one share of Class A common stock and one-third of one Private Placement Warrant), and (iii) the issuance of Class B common
stock, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to
Class A common stock subject to possible redemption. The Warrants were classified as Level 3 at the initial measurement date and as of
December 31, 2020 due to the use of unobservable inputs. As of March 31, 2022 and December 31, 2021, the Warrants were reclassified to
Level 1, for the Public Warrants, and Level 2, for the Private Placement Warrants, due to the use of observable inputs.
The Warrants are measured at
fair value on a recurring basis. The subsequent measurement of the Public Warrants as of March 31, 2022 and December 31, 2021 is classified
as Level 1 due to the use of an observable market quote in an active market under the ticker DWIN-WT. As the transfer of Private Placement
Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private Placement Warrants
having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant
is equivalent to that of each Public Warrant, with an insignificant adjustment for short-term marketability restrictions. As such, the
Private Placement Warrants are classified as Level 2.
The following table provides quantitative information
regarding Level 3 fair value measurements:
| |
December 31, 2020 | |
Risk-free interest rate | |
| 0.58 | % |
Expected term (years) | |
| 6.49 | |
Expected volatility | |
| 16.3 | % |
Exercise price | |
$ | 11.50 | |
Stock price | |
$ | 9.66 | |
Dividend yield | |
| 0.0 | % |
Note 8 — Stockholder’s Equity
Preferred Stock
The Company is authorized to
issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences
as may be determined from time to time by the Company’s board of directors. At March 31, 2022 and December 31, 2021, there were
no shares of preferred stock issued or outstanding.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8 — Stockholder’s Equity (cont.)
Common Stock
Class A Common Stock
— The Company is authorized to issue 36,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders
of Class A common stock are entitled to one vote for each share. At March 31, 2022 and December 31, 2021, there were 632,500 shares of
Class A common stock issued and outstanding (excluding 20,125,000 shares of common stock subject to possible redemption).
Class B Common Stock
— The Company is authorized to issue 7,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of
Class B common stock are entitled to one vote for each share. At March 31, 2022 and December 31, 2021, there were 5,031,250 shares of
Class B common stock issued and outstanding.
Holders of Class A common stock
and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required
by law.
The shares of Class B common
stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject
to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in
excess of the amounts offered in the Proposed Public Offering and related to the closing of a Business Combination, the ratio at which
shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of
the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so
that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate,
on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial
Public Offering (not including the shares of Class A common stock underlying the Placement Units) plus all shares of Class A common stock
and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked
securities issued, or to be issued, to any seller in a Business Combination, any private placement-equivalent warrants issued, or to be
issued, to any seller in a Business Combination, any private placement equivalent securities issued to the Sponsor or its affiliates upon
conversion of loans made to the Company).
Warrants
Public Warrants may only be
exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will
trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12
months from the closing of the Proposed Public Offering. The Public Warrants will expire five years after the completion of a Business
Combination or earlier upon redemption or liquidation.
The Company will not be obligated
to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant
exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants
is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration.
No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant
unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities
laws of the state of residence of the registered holder of the warrants.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 8 — Stockholder’s Equity
(cont.)
The Company has agreed that
as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use
its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the
warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class
A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering
the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the
closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any
period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis”
in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the foregoing, if a registration statement
covering the Class A common stock issuable upon exercise of the warrants is not effective within a specified period following the consummation
of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period
when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to
the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another
exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company may redeem
the Public Warrants:
|
● |
in whole and not in part; |
|
● |
at a price of $0.01 per warrant; |
|
● |
upon not less than 30 days’ prior written notice of redemption given after the warrants become exercisable; and |
| ● | if, and only if, the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders. |
If and when the warrants become
redeemable by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of
the warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect
such registration or qualification.
If the Company calls the Public
Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on
a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of Class A common stock
issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization,
reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below
its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to
complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders
of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if (x) the Company
issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing
of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue
price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance
to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable,
prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than
60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation
of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the shares of Class A common stock
during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination
(such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price
will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The Placement Warrants will
be identical to the Public Warrants underlying the Units being sold in the Proposed Public Offering, except that the Placement Warrants
and the Class A common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or salable until
30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will
be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees.
If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants
will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
DELWINDS INSURANCE ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 9 — Income Tax
The Company’s net deferred
tax assets are as follows:
| |
March 31, | |
| |
2022 | |
Deferred tax asset | |
| |
Net operating loss carryforward | |
$ | 770,000 | |
Valuation allowance | |
| (770,000 | ) |
Deferred tax (liability) asset | |
$ | - | |
The income tax provision consists
of the following:
| |
March 31, 2022 | |
Federal | |
| |
Current | |
$ | - | |
Deferred | |
| (494,000 | ) |
State | |
| - | |
Current | |
| - | |
Deferred | |
| - | |
Change in valuation allowance | |
| 494,000 | |
Income tax provision expense | |
$ | - | |
A reconciliation of the federal
income tax rate to the Company’s effective tax rate at March 31, 2022 is as follows:
| |
March 31, 2022 | |
Statutory federal income tax rate | |
| 21 | % |
State taxes, net of federal tax benefit | |
| 0 | % |
Permanent differences | |
| 110 | % |
Valuation allowance | |
| (131 | )% |
Income tax provision expense | |
| 0 | % |
As of March 31, 2021, the Company
had $770,000 in net operating loss carryforwards available to offset future taxable income.
Note 10 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up to May 16, 2022, the date that the financial statements were issued.
Other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in
the financial statements.
Subsequent to March 31, 2022,
we have drawn an additional an additional $300,000 bringing the total outstanding under the agreement to $500,000.
On April 8, 2022, we
filed a joint proxy statement/consent solicitation statement/prospectus relating to the issuance of securities and solicitation of votes
pursuant to the FOXO Transaction Agreement (the “Registration Statement”), and on May 13, 2022, we filed an amendment to the
Registration Statement.
On April 26, 2022, we
entered into an amendment (the “Amendment”) to the FOXO Transaction Agreement. The Amendment amends the definition of “2022
Bridge Financing End Date” in the Merger Agreement, to provide an extension to the end date of the 2022 Bridge Financing by extending
the end date to the “Outside Date,” as defined in the FOXO Transaction Agreement. The “Outside Date” is defined
in the Section 7.1(a) of the FOXO Transaction Agreement and is originally established as the five (5) month anniversary of the date of
the FOXO Transaction Agreement, or July 24, 2022, subject to extensions under the terms and conditions set forth in the FOXO Transaction
Agreement.
On May 10, 2022, the
Company filed a preliminary proxy statement in connection with a special meeting of its stockholders pursuant to which the Company will
seek the approval of its stockholders to extend the expiration of the period in which the Company must complete a business combination
from June 15, 2022 to September 15, 2022.